Old media buys into old energy, as Seven snaps up Nexus

Here’s a curious one. Seven Group – the major shareholder in the national Seven TV network and The West Australian newspaper, is investing $400 million into a troubled oil and gas producer and explorer Nexus Energy.

What, might one ask, would connect a media company with the energy sector? Perhaps it’s a sense of tradition. While new media companies such as Google and Apple have invested heavily in new energy technologies such as renewables, particularly wind and solar, perhaps it is natural, then, that an old media company should invest in old energy.

A couple of things might explain this investment. The group’s owner, Kerry Stokes, has always had a diversified portfolio – he made much of his initial money out of the Caterpillar dealership in WA and other parts of Australian and owns a near half share in equipment hire company Coates. And The West Australian is the only major daily newspaper in Australia’s biggest mining state.

Seven Group is also chaired by Don Voelte, the former head of Woodside Petroleum who was a fierce opponent of Labor’s various carbon pricing regimes, and clearly has an understanding and an appreciation of the oil and gas industry.

And it’s an opportunistic investment. Nexus shares have been crushed by a series of operational disasters that has wiped its profits and left it facing asset sales or even receivership.

The actual takeover of Nexus – which owns gas projects in Victoria and WA – will cost Seven just $26.6 million, although it will have to invest up to $400 million to meet the demands of drilling obligations and payments to noteholders.

Seven Group had been expected to expand its new areas, but analysts had been thinking more about healthcare or education. ”We think this is a good entry point into the energy sector,” one company source told Fairfax Media. ”We see some great value in the assets.”